Author Question: In the long run, does it matter whether a policy action was anticipated or not? What will be an ... (Read 59 times)

hbsimmons88 · **on:** Jun 30, 2018

In the long run, does it matter whether a policy action was anticipated or not?

What will be an ideal response?

Question 2

Consider the two graphs above. Suppose that improvements in technology enable farmers to produce two or more harvests of the same crop each year. This would ________ the desired level of inventories, as depicted in graph ________.

A) increase; B
B) increase; A
C) decrease; B
D) decrease; A

qytan · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

In the long run, output is potential output. The response to an anticipated policy action comes sooner, but is ultimately no different than the delayed response to a recognized policy. Nonetheless, it does matter whether or not the policy had been anticipated, because anticipated policies are less destabilizing to output.

Answer to Question 2

D